CASE SCENARIO # 1 (Valuing an Annuity): (2.5 Marks) PV of an Annuity: PV of a future cash flow: Present value=Future Value after t periods/((1+r)^t ) You are working in the Human Resources department of a large Canadian Corporation. One of your employees, Ted, has just turned 60 and for health reasons, will be taking early retirement from the company. Ted is planning on a combination of company pension, RRSP investments, Canada Pension Plan and Old Age Security to fund his retirement. Luckily, he has a generous indexed company pension and significant RRSP investments and does not need to count on Government pensions. Ted is unsure of how to handle his Canada Pension Plan (CPP) entitlement. CPP provides a lifetime pension at retirement to Canadians who have worked and paid into the plan. The dollar amount of the pension depends on the individual's earnings and payments into CPP during their working life. Ted has three options: Option # 1: Ted is entitled to a monthly CPP payment of $500 which will start when he turns 65. Option # 2: However, as an alternative it is possible to start receiving CPP as early as the age of 60, albeit at a reduced amount. The CPP payment is reduced by 0.6% for every month before age 65 to a maximum of 36%. Option # 3: Alternatively, he can wait until age 70 and get a higher monthly amount. If he waits until age 70, the rule is that CPP payments increase after the age of 65, by 0.7% each month up to a maximum of 42% at the age of 70. Payments will not increase after the age of 70. REQUIRED: Knowing that you are a whiz at financial matters, Ted has come to you for advice on which option to choose. Assuming that Ted will live to 85 and can earn a 6% return on his money. What is your advice to Ted - which option should he Choose? For each of the three (3) options described above, calculate the present value of the total Canada Pension Fund (CPP) payments. Make sure you clearly identify the values you are using for interest rate (r), cash payment (C), and the number of payments (t). Recommend what Ted should do which of the three options should he pick? Hint # 1: the cash flows (CPP payments) are monthly so you need to convert your interest rate to a monthly rate by dividing by 12. Show your assumptions and calculations for each option. Hint # 2: Once you have completed calculating the PV of the annuity (CPP) at ages 60, 65, and 70 you will need to be able to compare those dollar amounts on the same basis - at teds current age of 60. PROBLEM #2(Compound Interest) (2 Marks) Old Time savings bank pays 5% interest on its savings accounts. If you deposit $1000 in the bank and leave it there, how much interest you will earn in the first year? The second year and the 10th year? PROBLEM #3 (Future Value) (2 Marks) You deposit $1,000 into your bank account. If the bank pays 4% simple interest, how much will you accumulate in your account after 10 years? If the bank pays compound interest, how much of your earnings will be interest on interest? CASE SCENARIO #4 (2 Marks) Consider the case of a local supermarket manager who decides that, to increase profit, milk held in the stores storage room will no longer be refrigerated. Milk on the display shelf will still be refrigerated. What stakeholders might this affect? Will the impact of this decision be positive or negative for the stakeholders? Will it be positive or negative for the stakeholders? Explain. CASE SCENARIO# 5 (2 Marks) You are CEO of company and are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the principal-agent problem here, and how is it related to ethical considerations? CASE SCENARIO# 6 (2 Marks) Assume you can earn 9% per year on your investments. If you invest $100,000 for retirement at age 30, how much will you have 35 years later for retirement? If you wait until age 40 to invest the $100, 000, how much will you have 25 years later for retirement? Why is the difference so large? FORMAT SPECIFICATIONS & SUBMISSION Review, revise, and edit your work. Save your Final Assignment as either a Microsoft Word document or PDF that includes the following specifications: Title page (assignment title, course code, your name, student ID, assignment due date) 1.5 line spaced & 12-point Times New Roman/Arial font text Alignment- Justified page numbers Front Page and Contents according to APA Format Reference page and properly cited in-text citations that adhere to MLA or APA reference formats. ASSIGNMENT SHOULD BE IN YOUR OWN WORDS, COPIED WORK FROM THE INTERNET OR OTHER SOURCES WILL BE GIVEN A MARK OF ZERO.

CASE SCENARIO # 1 (Valuing an Annuity): (2.5 Marlsz) PV of an Ammity: C[r1r(1+r)t1] PV of a future cash flow: Presentvalue=(1+r)tFutureValueaftertperiods You are working in the Human Resources department of a large Cansdian Comporation. One of your employees, Ted, has just tumed 60 and for health reasons, will be taking early retireme it from the company. Ted is planning on a combination of company pension, RRSP investment: Canada Pension Plan and Old Age Security to fund his retirement. Luckily, he has a generous indered company pension and significant RRSP investments and does not nead to count on Govemment pensions. Ted is unsure of how to handle his Canada Pension Plan (CPP) entitlement. CPP provides a lifetime pension at retirement to Canadians who have worked and paid into the nlan The dollec REOUMRED* Knowing that you are a whiz at financial matters, Ted has come to you for advice on Which option to choose, Assuming that Ted will liwe to 85 and can earm a 6% returnon his money. What is your advice to Ted - which option should he Choose? For each of the three (3) options described above, calculate the present value of the total Canada Pension Fund (CPP) payments, Make sure you clearly identify the values you are using for interest rate (r), cash payment (C), and the number of payments (t). Recommend what Ted should do - which of the three options ahould he piche? - Hint # 1; the cash floms (CPP payments) are monthly so you need to convert yourimiegt rate to a monthly rate by diniding by 12 - Show your assumptions and calculations for each option. - Hint # 2, Once you have completed calculating the PV of the annuity (CPP) at ages 60,65 , and 70 - you will need to be able to compare those dollar a mounts on the aame basis - at ted's current age of 60. CASE SCENARIO # 1 (Valuing an Annuity): (2.5 Marlsz) PV of an Ammity: C[r1r(1+r)t1] PV of a future cash flow: Presentvalue=(1+r)tFutureValueaftertperiods You are working in the Human Resources department of a large Cansdian Comporation. One of your employees, Ted, has just tumed 60 and for health reasons, will be taking early retireme it from the company. Ted is planning on a combination of company pension, RRSP investment: Canada Pension Plan and Old Age Security to fund his retirement. Luckily, he has a generous indered company pension and significant RRSP investments and does not nead to count on Govemment pensions. Ted is unsure of how to handle his Canada Pension Plan (CPP) entitlement. CPP provides a lifetime pension at retirement to Canadians who have worked and paid into the nlan The dollec REOUMRED* Knowing that you are a whiz at financial matters, Ted has come to you for advice on Which option to choose, Assuming that Ted will liwe to 85 and can earm a 6% returnon his money. What is your advice to Ted - which option should he Choose? For each of the three (3) options described above, calculate the present value of the total Canada Pension Fund (CPP) payments, Make sure you clearly identify the values you are using for interest rate (r), cash payment (C), and the number of payments (t). Recommend what Ted should do - which of the three options ahould he piche? - Hint # 1; the cash floms (CPP payments) are monthly so you need to convert yourimiegt rate to a monthly rate by diniding by 12 - Show your assumptions and calculations for each option. - Hint # 2, Once you have completed calculating the PV of the annuity (CPP) at ages 60,65 , and 70 - you will need to be able to compare those dollar a mounts on the aame basis - at ted's current age of 60